Correlation Between Solstad Offshore and International Consolidated

Can any of the company-specific risk be diversified away by investing in both Solstad Offshore and International Consolidated at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Solstad Offshore and International Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solstad Offshore ASA and International Consolidated Airlines, you can compare the effects of market volatilities on Solstad Offshore and International Consolidated and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Solstad Offshore with a short position of International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and International Consolidated.

Diversification Opportunities for Solstad Offshore and International Consolidated

0.77

Correlation Coefficient

Solstad Offshore  International Consolidated

Poor diversification

The 3 months correlation between Solstad and International is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and Solstad Offshore is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Solstad Offshore ASA are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Solstad Offshore i.e., Solstad Offshore and International Consolidated go up and down completely randomly.

Pair Corralation between Solstad Offshore and International Consolidated

Assuming the 90 days trading horizon Solstad Offshore is expected to generate 1.77 times less return on investment than International Consolidated. In addition to that, Solstad Offshore is 2.12 times more volatile than International Consolidated Airlines. It trades about 0.02 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.08 per unit of volatility. If you would invest  15,478  in International Consolidated Airlines on October 4, 2024 and sell it today you would earn a total of  14,712  from holding International Consolidated Airlines or generate 95.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Solstad Offshore ASA  vs.  International Consolidated Air

Solstad Offshore ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

International Consolidated

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solstad Offshore and International Consolidated

The main advantage of trading using opposite Solstad Offshore and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore position performs unexpectedly, International Consolidated can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in International Consolidated will offset losses from the drop in International Consolidated's long position.

The idea behind Solstad Offshore ASA and International Consolidated Airlines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.